Moving to Spain: Why Timing Is Everything for Your Taxes

Moving to Spain from the UK can offer a beautiful lifestyle, sunshine, and a change of pace, but if you don’t get the timing right, it can also trigger unnecessary tax bills. Most British expats are unaware of just how different the tax systems are, and how one small misstep in the calendar can cost thousands in avoidable taxes.

This guide explains why timing your move to Spain, even by a few months, can have a major financial impact. We'll break down the rules, the risks, and the opportunities.

The UK and Spain: Two Very Different Tax Calendars

The UK tax year runs from 6 April to 5 April the following year. In contrast, Spain’s tax year is aligned with the calendar year, from 1 January to 31 December.

Here’s where it gets tricky: Spain does not have a “split-year” tax regime. If you meet the tax residency criteria during any part of the year, you’re treated as a Spanish tax resident for the entire year, backdated to 1 January.

That means if you arrive in Spain on, say, 1 May and remain for the rest of the year, the Spanish tax authorities consider you resident from 1 January, even though you weren’t physically there at the start of the year.‍

Key residency test: If you spend more than 183 days in Spain during the calendar year, you're tax resident from 1 January of that year.

Spain also counts temporary absences (e.g. holidays, overseas work trips) as days spent in Spain unless you can prove a permanent centre of interest elsewhere. In short, “escaping” for a few weeks to avoid the 183-day rule won’t work.

The Risk: Becoming Retroactively Tax Resident in Spain

Why does this matter? Because Spain can pull earlier financial events into its tax net, even if they occurred before you became a resident. This means that financial actions taken before your official move could still be subject to Spanish tax laws.

For example, if you sell your UK home in March, move to Spain in May, and spend the rest of the year there, Spain may treat you as a tax resident from January 1st. This means that the capital gain from the sale of your property could fall under Spanish taxation, despite your belief that the sale occurred before you became a resident.

The Problem: Spain and Private Residence Relief

Spain does not offer the UK’s Private Residence Relief, which allows you to exclude capital gains on the sale of your main home. As a result, any gain from selling your UK property could be taxable in Spain, even if you thought it was exempt under UK rules.

While Spain does offer some exemptions on capital gains tax (CGT) for the sale of a main residence, there are strict conditions:

• You must be aged 65 or over, or
• You must reinvest all proceeds into a new main residence in Spain,
• The property must have been your main residence for at least three years, and
• You must reinvest the funds within two years of selling the property.

If you don’t meet these conditions, the capital gain is taxable at a rate between 19% and 28%, depending on the amount.

Pension Mistakes: Don’t Assume Your Lump Sum Is Tax-Free

Another common error is taking your Pension Commencement Lump Sum (PCLS), often referred to as a tax-free lump sum in the UK, after becoming Spanish tax resident. Spain does not recognise this tax-free treatment. Any PCLS received while Spanish tax resident is fully taxable at your marginal income tax rate, which ranges from 19% to 47%, depending on the region and your other income.

Exception: Crown Service Pensions

These are taxed only in the UK and not in Spain, thanks to the UK–Spain Double Taxation Agreement. This includes some government and military pensions, but not state pensions or private pensions.

Dual Tax Residency and the Administrative Nightmare

What if you're considered tax resident in both countries? Let’s say you leave the UK on 1 May (and meet the UK split-year rules), and move to Spain on the same day (and exceed 183 days by year-end).

You may be:

• Split-year resident in the UK (April to May)
• Full-year resident in Spain (January to December)

The good news is the UK–Spain double tax treaty ensures you won't be taxed twice on the same income. But the bad news? The admin can be painful. You’ll need dual reporting, treaty tie-breaker applications, possibly double filings, and bilingual advisers.

The Opportunity: Move Later in the Year

If you arrive in Spain during late summer or autumn and spend fewer than 183 days in the country during that calendar year, you won’t be considered a Spanish tax resident until 1 January of the following year. This creates a unique window of opportunity.

During this gap, you’re effectively not tax resident anywhere for a short period. Having left the UK and triggered split-year treatment, you haven’t yet become a tax resident in Spain. This planning window can be used to your advantage.

For example, you may use this period to sell assets such as shares, ISAs, or a UK main residence. You could also consider rebasing portfolios, withdrawing income from pensions (with the NT code applied), or reorganising your structures for income, wealth, and succession planning.

However, it’s important to note that not all assets escape tax. UK property that is not classified as your main residence is still subject to UK capital gains tax, regardless of your residency status.

Consider the Beckham Law (Special Tax Regime)

If you're moving to Spain for work, you may be eligible for the "Beckham Law," a special expatriate tax regime designed to attract international talent. Under this regime, you are taxed only on Spanish-source income, not global income. Employment income is taxed at a flat rate of 24% up to €600,000, and there is no tax on foreign capital gains or investment income. Additionally, non-Spanish assets are not subject to Spanish wealth tax.

However, there are conditions to qualify for this regime. You must not have been a Spanish tax resident in the previous 10 years and must be employed by a Spanish company or seconded to Spain. The application for the Beckham Law must be submitted within 6 months of registration with the Spanish Social Security system.

The regime lasts for 6 tax years, including the year of arrival, plus 5 additional years. If you arrive in the second half of the year, this benefit can extend slightly beyond 6 calendar years.

Move Smart, Not Just Fast

The truth is, Spain doesn’t penalise expats, but it does penalise poor timing. A well-planned move, even if delayed by a few months, can have significant advantages. For example, it could help you avoid thousands in capital gains tax, preserve your pension lump sum, and create access to a rare planning window. Additionally, it can minimise the headaches of dual reporting.

If you're able to delay your move until after 1 July, you can often take advantage of the UK’s split-year rule. This strategy helps you avoid triggering Spanish tax residency for that calendar year, allowing for a smoother and more efficient financial handover.

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